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Founded in 1994, Mid-America Apartment Communities, Inc. is a Memphis, Tennessee-based self-administered and self-managed real estate investment trust, or REIT, that focuses on acquiring, owning and operating apartment communities in the Sunbelt region of the United States. As of December 31, 2012 , we owned 100% of 160 properties representing 47,809 apartment units. Four properties include retail components with approximately 108,000 square feet of gross leasable area. As of December 31, 2012 , we also had 33.33% ownership interests in Mid-America Multifamily Fund I, LLC, or Fund I, and Mid-America Multifamily Fund II, LLC, or Fund II, which owned two properties containing 626 apartment units and four properties containing 1,156 apartment units, respectively. These apartment communities were located across 13 states.

Our business is conducted principally through Mid-America Apartments, L.P., which we refer to as our Operating Partnership. We are the sole general partner of the Operating Partnership, holding 39,721,461 common units of partnership interest, or common units, comprising a 95.8% general partnership interest in the operating partnership as of December 31, 2012 . Unless the context otherwise requires, all references in this Annual Report on Form 10-K to â€śwe,â€ť â€śus,â€ť â€śour,â€ť â€śthe company,â€ť or â€śMAAâ€ť refer collectively to Mid-America Apartment Communities, Inc. and its subsidiaries.

Our corporate offices are located at 6584 Poplar Avenue, Memphis, Tennessee 38138 and our telephone number is (901) 682-6600. As of December 31, 2012 , we had 1,384 full-time employees and 62 part-time employees.

FINANCIAL INFORMATION ABOUT SEGMENTS

As of December 31, 2012 , we owned or had an ownership interest in 166 multifamily apartment communities in 13 different states from which we derived all significant sources of earnings and operating cash flows. Senior management evaluates performance and determines resource allocations by reviewing apartment communities individually and in the following reportable operating segments:
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Large market same store communities are generally communities in markets with a population of at least 1 million and at least 1% of the total public multifamily REIT units that we have owned and that have been stabilized for at least a full 12 months and have not been classified as held for sale. Communities are considered stabilized after achieving and maintaining at least 90% occupancy for 90 days.
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Secondary market same store communities are generally communities in markets with populations of more than 1 million but less than 1% of the total public multifamily REIT units or markets with populations of less than 1 million that we have owned and that have been stabilized for at least a full 12 months and have not been classified as held for sale. Communities are considered stabilized after achieving and maintaining at least 90% occupancy for 90 days.
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Non same store communities and other includes recent acquisitions, communities in development or lease-up and communities that have been classified as held for sale. Also included in non same store communities are non multifamily activities which represent less than 1% of our portfolio.

On the first day of each calendar year, we determine the composition of our same store operating segments for that year, which allows us to evaluate full period-over-period operating comparisons. We utilize net operating income, or NOI, in evaluating the performance. Total NOI represents total property revenues less total property operating expenses, excluding depreciation and amortization, for all properties held during the period regardless of their status as held for sale. We believe NOI is a helpful tool in evaluating the operating performance of our segments because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance.

A summary of segment operating results for 2012 , 2011 and 2010 is included in Item 8. Financial Statements and Supplementary Data â€“ Notes to Consolidated Financial Statements, Note 13. Additionally, segment operating performance for such years is discussed in Item 7, â€śManagementâ€™s Discussion and Analysis of Financial Condition and Results of Operationsâ€ť, in this Annual Report on Form 10-K.

BUSINESS OBJECTIVES

Our primary business objectives are to protect and grow existing property values, to maintain a stable and increasing cash flow that will fund our dividend through all parts of the real estate investment cycle, and to create new shareholder value by growing in a disciplined manner. To achieve these objectives, we intend to continue to pursue the following goals and strategies:

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effectively and efficiently operate our existing properties with an intense property and asset management focus and a decentralized structure;
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when accretive to long-term shareholder value, acquire or develop additional high-quality properties throughout the Sunbelt region of the United States;
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selectively dispose of properties that no longer meet our ownership guidelines;
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develop, renovate and reposition existing properties;
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diversify investment capital across both large and secondary markets to achieve a growing and less volatile operating performance profile to better support dividend funding across the full real estate and economic market cycle;
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enter into joint ventures to acquire and reposition properties; and
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actively manage our capital structure.

OPERATION STRATEGY

Our goal is to generate our return on investment collectively and in each apartment community by increasing revenues, controlling operating expenses, maintaining high occupancy levels and reinvesting as appropriate. The steps taken to meet these objectives include:

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diversifying portfolio investments across both large and secondary markets;
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providing management information and improved customer services through technology innovations;
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utilizing systems to enhance property managersâ€™ ability to optimize revenue by adjusting rents in response to local market conditions and individual unit amenities;
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developing new ancillary income programs aimed at offering new services to residents, including cable, on which we generate revenue;
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implementing programs to control expenses through investment in cost-saving initiatives, including measuring and passing on to residents the cost of various expenses, including water and other utility costs;
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analyzing individual asset productivity performances to identify best practices and improvement areas;
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proactively maintaining the physical condition of each property through ongoing capital investments;
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improving the â€ścurb appealâ€ť of the apartment communities through extensive landscaping and exterior improvements, and repositioning apartment communities from time-to-time to enhance or maintain market positions;
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aggressively managing lease expirations to align with peak leasing traffic patterns and to maximize productivity of property staffing;
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allocating additional capital, including capital for selective interior and exterior improvements;
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compensating employees through performance-based compensation and stock ownership programs;
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maintaining a hands-on management style and â€śflatâ€ť organizational structure that emphasizes senior management's continued close contact with the market and employees;
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selling or exchanging underperforming assets;
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issuing or repurchasing shares of common or preferred stock when cost of capital and asset values permit;
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acquiring and selectively developing properties; and
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maintaining disciplined investment and capital allocation practices.

Decentralized Operational Structure

We operate in a decentralized manner. We believe that our decentralized operating structure capitalizes on specific market knowledge, provides greater personal accountability than a centralized structure and is beneficial in the acquisition and redevelopment processes. To support this decentralized operational structure, senior and executive management, along with various asset management functions, are proactively involved in supporting and reviewing property management through extensive reporting processes and frequent on-site visitations. To maximize the amount of information shared between senior and executive management and the properties on a real time basis, we utilize a web-based property management system. The system contains property and accounting modules that allow for operating efficiencies, continued expense control, provide for various expanded revenue management practices, and improve the support provided to on-site property operations. We use a â€śyield managementâ€ť pricing program that helps our property managers optimize rental revenues, and we also utilize purchase order and accounts payable software to provide improved controls and management information. We have also implemented revised utility billing processes, rolled out new web-sites, including a new resident portal facilitating communication with residents and enabling on-line payments of rents and fees, on-line lease applications and improved web-based marketing programs.

Property and Asset Management Focus

We have traditionally emphasized property management, and over the past several years, we have deepened our asset management functions to provide additional support in marketing, training, ancillary income and revenue management. A majority of our property managers are Certified Apartment Managers, a designation established by the National Apartment Association, which provides training for on-site manager professionals. We also provide our own in-house leadership development program consisting of a three-module program followed by two comprehensive case studies, which was developed with the assistance of U.S. Learning, Inc.

ACQUISITION AND JOINT VENTURE STRATEGY

One of our growth strategies is to acquire and redevelop apartment communities for our wholly-owned portfolio that are diversified over both large and secondary markets throughout the Sunbelt region of the United States and that meet our investment criteria. We have extensive experience and research-based skills in the acquisition and repositioning of multifamily communities. In addition, we will acquire newly built and developed communities that can be purchased on a favorable pricing basis. We will continue to evaluate opportunities that arise, and will utilize this strategy to increase the number of apartment communities in strong and growing markets.

Another of our growth strategies is to co-invest with partners in joint venture opportunities to the extent we believe that a joint venture will enable us to obtain a higher return on our investment through management and other fees, which leverage our skills in acquiring, repositioning, redeveloping and managing multifamily investments. In addition, the joint venture investment strategy can provide a platform for creating more capital diversification and lower investment risk for us. At present, we have focused our joint venture investment strategy on properties seven years old or older, with younger acquisitions becoming part of the wholly-owned portfolio.

As of December 31, 2012 , for this strategy we were partners in three joint ventures: Mid-America Multifamily Fund I, LLC, or Fund I; Mid-America Multifamily Fund II, LLC, or Fund II; and Mid-America Multifamily Fund III, LLC, or Fund III. These joint ventures did not acquire any properties during 2012.

DISPOSITION STRATEGY

At 15 years weighted average age (based on gross asset values), we believe that we have one of the younger portfolios in the multifamily REIT sector and strive to maintain a well-conditioned portfolio of young assets, believing that continuous capital replacement and maintenance will lead to higher long-run returns on investment. From time-to-time, we dispose of mature assets, defined as those apartment communities that no longer meet our investment criteria and long-term strategic objectives, to ensure that our portfolio consists primarily of high quality, well-located properties within our market area. Typically, we select assets for disposition that do not meet our present investment criteria, including estimated future return on investment, location, market, potential for growth and capital needs. From time-to-time we also may dispose of assets for which we receive an offer meeting or exceeding our return on investment criteria even though those assets may not meet the disposition criteria disclosed above. During 2012 , we disposed of nine properties totaling 2,254 units.

DEVELOPMENT AND REDEVELOPMENT STRATEGY

Periodically, we invest in limited expansion development projects through fee-based development agreements using fixed price or cost controlled construction contracts. These contracts can have variability to cover any project cost overruns that may occur. Some development agreements require that cost overruns are contractually shared with the developer up to a specified level, while other development agreements stipulate that cost overruns are the responsibility of the developer. In October 2010, we purchased land in Franklin (Nashville), Tennessee and entered into an agreement to develop a 428-unit apartment community on the site. Construction began in late 2010. As of December 31, 2012 , all 428 units have been completed and were 77% leased up. During 2011, we also began developing a 210-unit phase II to the 1225 South Church apartments in Charlotte, North Carolina that were purchased in December 2010. As of December 31, 2012 , no units have been delivered for 1225 South Church. We purchased land in Little Rock, Arkansas during 2011 and entered into a development agreement to develop a 312-unit apartment community on the site. All 312 units for the Little Rock development have been completed and delivered and were 77% leased up as of December 31, 2012 . During 2012, we purchased 10.6 acres of land and began construction on a new 270-unit community located in the Charleston, South Carolina metropolitan area. As of December 31, 2012 , no units have been delivered for the land in Charleston, South Carolina. During 2012, we also purchased 2.0 acres of land and began construction on a new 294-unit community located in Jacksonville, Florida. As of December 31, 2012 , no units have been delivered. While we seek opportunistic new development investments offering attractive long-term investment returns, we do not currently intend to maintain a dedicated development staff or to expand into development in a significant way. We expect our investment in new development will remain a smaller component of overall growth as compared to growth through acquiring existing properties.

Beginning in 2005, we began an initiative of upgrading a significant number of our existing apartment communities in key markets across our portfolio. We focus on both interior unit upgrades and shared exterior amenities above and beyond routine capital upkeep in markets that we believe continue to have growth potential and can support the increased rent. During the year ended December 31, 2012 , we renovated 3,236 units at an average rental rate that we believe was approximately 10% above the normal market rate increase.

CEO BACKGROUND

EXECUTIVE OFFICERS

The following individuals served as the executive officers in 2012:

H. ERIC BOLTON, JR.

Mr. Bolton, age 56, is our Chairman of the Board of Directors and Chief Executive Officer. Mr. Bolton joined us in 1994 as Vice President of Development and was named Chief Operating Officer in February 1996 and promoted to President in December 1996. Mr. Bolton assumed the position of Chief Executive Officer in October 2001 and became Chairman of the Board of Directors in September 2002. Mr. Bolton was with Trammell Crow Company for more than five years, and prior to joining us was Executive Vice President and Chief Financial Officer of Trammell Crow Realty Advisors.

ALBERT M. CAMPBELL, III

Mr. Campbell, age 46, is our Executive Vice President and Chief Financial Officer. Prior to his appointment as CFO on January 1, 2010, Mr. Campbell served as our Executive Vice President, Treasurer and Director of Financial Planning and was responsible for managing the funding requirements of the business to support corporate strategy. Mr. Campbell joined us in 1998 and was responsible for external reporting and financial planning. Prior to joining us, Mr. Campbell worked as a Certified Public Accountant with Arthur Andersen and served various finance and accounting roles with Thomas & Betts Corporation.

THOMAS L. GRIMES, JR.

Mr. Grimes, age 44, is our Executive Vice President and Chief Operating Officer. Mr. Grimes was promoted to Chief Operating Officer in December 2011, having previously served as Executive Vice President and Director of Property Management. Prior to this position Mr. Grimes served us as an Operations Director over the Central and North Regions. He also served as Director of Business Development where he worked with our joint venture partners, managed our new development efforts and directed our ancillary income business. Mr. Grimes joined us in 1994.

Our Board of Directors proposes that Messrs. Bolton, Graf, Horn, Norwood, Sanders, Sansom and Shorb, all of whom are currently serving as directors, be elected for a term of one year or until their successors are duly elected and qualified. We have no reason to believe that any nominee for Director will not agree or be available to serve as a director if elected. However, should any nominee become unable or unwilling to serve, the proxies may be voted for a substitute nominee or to allow the vacancy to remain open until filled by our Board of Directors. The presence of a quorum at the Annual Meeting, either in person or by written proxy, and the affirmative vote of a plurality of the votes cast at the meeting are necessary to elect a nominee as a director.

Our Board of Directors believes that it is necessary for our directors to possess a variety of background and skills in order to provide a broad voice of experience and leadership. When searching for new candidates, the Nominating and Corporate Governance Committee considers the evolving needs of our Board of Directors and searches for candidates that fill any current or anticipated future gap. When considering new directors, the Nominating and Corporate Governance Committee considers the amount of business management and education of a candidate, industry knowledge, conflicts of interest, public company experience, integrity and ethics, and commitment to the goal of maximizing stockholder value. The Nominating and Corporate Governance Committee does not have a policy about diversity, but does seek to provide our Board of Directors with a depth of experience and differences in viewpoints and skills. In considering candidates for our Board of Directors, the Nominating and Corporate Governance Committee considers both the entirety of each candidateâ€™s credentials and the current and potential future needs of our Board of Directors. With respect to the nomination of continuing directors for re-election, the individualâ€™s contributions to our Board of Directors are also considered.

All our directors bring unique skills to our Board of Directors, integrity, high ethical standards and a dedication to representing our shareholders. Furthermore, all of our directors live in states in which we currently have real estate investments. This provides them with geographic expertise related to our portfolio footprint. Certain individual qualifications and skills of our directors that contribute to our Board of Directorsâ€™ effectiveness as a whole are described below.

Information regarding each of the nominees for director is set forth below. Directorsâ€™ ages are given as of the date of this Proxy Statement.

NOMINEES FOR ELECTION

H. ERIC BOLTON, JR.

Mr. Bolton, age 56, has served as a director since February 1997. Mr. Bolton is our Chairman of the Board of Directors and Chief Executive Officer. Mr. Bolton joined us in 1994 as Vice President of Development and was named Chief Operating Officer in February 1996 and promoted to President in December 1996. Mr. Bolton assumed the position of Chief Executive Officer following the planned retirement of George E. Cates in October 2001 and became Chairman of the Board of Directors in September 2002. Mr. Bolton was with Trammell Crow Company for more than five years, and prior to joining us was Executive Vice President and Chief Financial Officer of Trammell Crow Realty Advisors.

Key Attributes, Experiences and Skills: Mr. Bolton brings to our Board ethical, decisive and effective leadership, extensive business and operating experience, and a tremendous knowledge of our company and the multi-family real estate industry. In addition, Mr. Bolton offers his broad strategic vision for our company.

Mr. Bolton's service as our Chairman and Chief Executive Officer creates a critical link between management and our Board, enabling our Board to perform its oversight function with the benefits of management's perspectives on the business.

ALAN B. GRAF, JR.

Mr. Graf, age 59, has served as a director since June 2002. Mr. Graf is the Executive Vice President and Chief Financial Officer of FedEx Corporation, a position he has held since 1998 and is a member of FedEx Corporationâ€™s Executive Committee. Prior to that time, Mr. Graf was Executive Vice President and Chief Financial Officer for FedEx Express, FedExâ€™s predecessor, from 1991 to 1998. Mr. Graf joined FedEx in 1980. Mr. Graf also serves on the boards of NIKE, Inc., Methodist LeBonheur Healthcare and the Indiana University Foundation.

Key Attributes, Experiences and Skills: As a result of Mr. Grafâ€™s 33-year career at FedEx Corporation, Mr. Graf offers valuable business leadership, management experience and offers insight and guidance on strategic direction and growth opportunities. Mr. Graf also provides financial expertise to our Board, including an understanding of financial statements, corporate finance, accounting and capital markets, as a result of his financial background and his service on the audit committee of NIKE, Inc.

RALPH HORN

Mr. Horn, age 72, has served as a director since April 1998. Mr. Horn was elected President, Chief Operating Officer, and a director of First Tennessee National Corporation, or FTNC, now First Horizon National Corporation, in July 1991 and Chief Executive Officer in April 1994. Mr. Horn was elected Chairman of the Board of Directors of FTNC in January 1996. Mr. Horn served as Chief Executive Officer and President of FTNC until July 2002, and as Chairman of the Board of Directors through December 2003.

Key Attributes, Experiences and Skills: Mr. Horn offers valuable business, leadership and management, and strategic planning experience which he gained during his tenure as Chief Executive Officer and Chairman of First Tennessee National Corporation. In addition, Mr. Horn provides valuable insight from his experience serving as a director of a number of other large public companies, which has provided him with extensive corporate governance experience, capital market experience and financial expertise.

PHILIP W. NORWOOD

Mr. Norwood, age 65, has served as a director since August 2007. Mr. Norwood is a Senior Advisor for Faison Enterprises, Inc., a real estate development and investment company. Mr. Norwood served as the President and Chief Executive Officer of Faison Enterprises, Inc. from 1994 until his retirement in March 2013. Prior to joining Faison Enterprises, Inc., Mr. Norwood held several positions for Trammell Crow Company. Mr. Norwood is a member of several real estate associations.

Key Attributes, Experiences and Skills: Mr. Norwood offers extensive and in-depth real estate knowledge and experience, as well as capital markets and financial expertise, as a result of his 33-year career in the real estate industry and extensive participation in some of the most prominent real estate associations. This knowledge and experience allows him to offer astute insight into operational and strategic matters as well as potential acquisitions and divestitures. In addition, Mr. Norwoodâ€™s industry specific operational experience makes him uniquely qualified to serve as the Chairman of the Compensation Committee as he has a keen understanding of executive compensation, its impact on recruitment and retention and the alignment of management and shareholder interests.

W. REID SANDERS

Mr. Sanders, age 63, has served as a director since March 2010. Mr. Sanders is the Co-Founder and former Executive Vice President of Southeastern Asset Management, and the former President of Longleaf Partners Funds. Prior to co-founding Southeastern Asset Management in 1975, Mr. Sanders served as an investment officer and worked in credit analysis and commercial lending in the banking industry from 1971 to 1975. Mr. Sanders currently serves on the Board of Directors for Independent Bank, serves on the Investment Committee at Cypress Realty, a limited partnership involved in commercial real estate, and is on the Advisory Board of SSM Venture Partners.

Key Attributes, Experiences and Skills: Mr. Sanders offers financial expertise and valuable insight into the capital markets stemming from his 40-year career in the financial industry. Mr. Sandersâ€™ understanding of financial statements, corporate finance, and accounting makes him a valued member of the Audit Committee. In addition, Mr. Sandersâ€™ service on the Investment Committee of a commercial real estate limited partnership allows him to provide valuable insights regarding the evaluation of potential acquisitions and divestitures.

WILLIAM B. SANSOM

Mr. Sansom, age 71, has served as a director since November 2006. Mr. Sansom is the Chairman of the Board of Directors, Chief Executive Officer and President of the H.T. Hackney Co. From 1979 to 1981, Mr. Sansom served as the Tennessee Commissioner of Transportation, and from 1981 to 1983 as the Tennessee Commissioner of Finance and Administration. Mr. Sansom serves as the Chairman of the Board of Directors of the Tennessee Valley Authority.

Key Attributes, Experiences and Skills: Mr. Sansomâ€™s service as the Chief Executive Officer of the H.T. Hackney Co. provides valuable business leadership and management experience, including expertise leading a large organization with expansive operations depending on localized and empowered management, giving him a keen understanding of issues facing our operations. In addition, Mr. Sansomâ€™s experience on the board of directors of the Tennessee Valley Authority, First Horizon National Corporation and Astec Industries has given him a strong understanding of risk management, corporate governance, compensation practices and capital markets.

GARY SHORB

Mr. Shorb, age 62, has served as a director since May 2012. Mr. Shorb is the President and Chief Executive Officer of Methodist Le Bonheur Healthcare, an integrated healthcare system that comprises a seven-hospital operation centered in the Mid-South with over 11,000 employees. Rated as the number one hospital in the region (2011 â€“ 2012) by U.S. News and World Report , Methodist Le Bonheur Healthcare received accolades in twelve specialties. Mr. Shorb joined Methodist Le Bonheur Healthcare in 1990 as Executive Vice President. Before joining Methodist Le Bonheur Healthcare, Mr. Shorb served as President of the Regional Medical Center in Memphis, Tennessee. Prior to his work in the healthcare industry, Mr. Shorb worked as a project engineer with Exxon and served as a lieutenant Commander in the U.S. Navy. Mr. Shorb serves on a number of civil and not-for-profit boards.

Key Attributes, Experiences and Skills: As a result of Mr. Shorbâ€™s long career at Methodist Le Bonheur Healthcare and senior leadership positions held prior to joining Methodist Le Bonheur Healthcare, Mr. Shorb offers valuable business leadership with expertise and experience in organizational development, management and business finance. As Chief Executive Officer of a large consumer and service based operation, Mr. Shorb brings insights and experience directly attributable to our service based operations.

Our Board of Directors recommends a vote â€śFORâ€ť each of the Director nominees.

The seven nominees receiving the most â€śForâ€ť votes will be elected. Neither abstentions nor broker non-votes will have any legal effect on whether this proposal is approved.

MANAGEMENT DISCUSSION FROM LATEST 10K

Revenue Recognition and Real Estate Sales

We lease multifamily residential apartments under operating leases primarily with terms of one year or less. Rental revenues are recognized using a method that represents a straight-line basis over the term of the lease and other revenues are recorded when earned.

We record gains and losses on real estate sales in accordance with accounting standards governing the sale of real estate. For sale transactions meeting the requirements for the full accrual method, we remove the assets and liabilities from our Consolidated Balance Sheets and record the gain or loss in the period the transaction closes. For properties contributed to joint ventures, MAA records gains on the partial sale in proportion to the outside partnersâ€™ interest in the venture.

Capitalization of expenditures and depreciation and amortization of assets

We carry real estate assets at depreciated cost. Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of the related assets, which range from 8 to 40 years for land improvements and buildings, 5 years for furniture, fixtures, and equipment, 3 to 5 years for computers and software, and 6 months for acquired leases, all of which are subjective determinations. Repairs and maintenance costs are expensed as incurred while significant improvements, renovations and replacements are capitalized. The cost to complete any deferred repairs and maintenance at properties acquired by us in order to elevate the condition of the property to our standards are capitalized as incurred.

Acquisition of real estate assets

We account for our acquisitions of investments in real estate in accordance with ASC 805-10, Business Combinations , which requires the fair value of the real estate acquired to be allocated to the acquired tangible assets, consisting of land, building and furniture, fixtures and equipment, and identified intangible assets, consisting of the value of in-place leases.

We allocate the purchase price to the fair value of the tangible assets of an acquired property, which includes the land, building, and furniture, fixtures, and equipment, determined by valuing the property as if it were vacant, based on managementâ€™s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. These methods include using stabilized NOI and market specific capitalization and discount rates.

In allocating the fair value of identified intangible assets of an acquired property, the in-place leases are valued based on current rent rates and time and cost to lease a unit. Management concluded that the residential leases acquired on each of its property acquisitions are approximately at market rates since the lease terms generally do not extend beyond one year.

Impairment of long-lived assets, including goodwill

We account for long-lived assets in accordance with the provisions of accounting standards for the impairment or disposal on long-lived assets and evaluate our goodwill for impairment under accounting standards for goodwill and other intangible assets. We evaluate goodwill for impairment on at least an annual basis, or more frequently if a goodwill impairment indicator is identified. We periodically evaluate long-lived assets, including investments in real estate and goodwill, for indicators that would suggest that the carrying amount of the assets may not be recoverable. The judgments regarding the existence of such indicators are based on factors such as operating performance, market conditions and legal factors.

Long-lived assets, such as real estate assets, equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented on the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of properties classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

Goodwill is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss for goodwill is recognized to the extent that the carrying amount exceeds the implied fair value of goodwill. This determination is made at the reporting unit level and consists of two steps. First, we determine the fair value of a reporting unit and compare it to its carrying amount. In the apartment industry, the primary method used for determining fair value is to divide annual operating cash flows by an appropriate capitalization rate. We determine the appropriate capitalization rate by reviewing the prevailing rates in a propertyâ€™s market or submarket. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unitâ€™s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation in accordance with accounting standards for business combinations. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

Fair value of derivative financial instruments

We utilize certain derivative financial instruments, primarily interest rate swaps and interest rate caps, during the normal course of business to manage, or hedge, the interest rate risk associated with our variable rate debt or as hedges in anticipation of future debt transactions to manage well-defined interest rate risk associated with the transaction.

In order for a derivative contract to be designated as a hedging instrument, changes in the hedging instrument must be highly effective at offsetting changes in the hedged item. The historical correlation of the hedging instruments and the underlying hedged items are assessed before entering into the hedging relationship and on a quarterly basis thereafter, and have been found to be highly effective.

We measure ineffectiveness using the change in the variable cash flows method or the hypothetical derivative method for interest rate swaps and the hypothetical derivative method for interest rate caps for each reporting period through the term of the hedging instruments. Any amounts determined to be ineffective are recorded in earnings if in an overhedged position. The change in fair value of the interest rate swaps and the intrinsic value or fair value of interest rate caps designated as cash flow hedges are recorded to accumulated other comprehensive income in the statement of shareholdersâ€™ equity.

The valuation of our derivative financial instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the interest rate caps. The variable interest rates used in the calculation of projected receipts on the interest rate cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. Additionally, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterpartyâ€™s nonperformance risk in the fair value measurements. Changes in the fair values of our derivatives are primarily the result of fluctuations in interest rates. See Item 8. Financial Statements and Supplementary Data â€“ Notes to Consolidated Financial Statements, Notes 5 and 6 for further discussion.

OVERVIEW OF THE YEAR ENDED DECEMBER 31, 2012

We experienced an increase in income from continuing operations in 2012 as increases in revenues outpaced increases in expenses. The increases in revenues came from a 6.0% increase in our large market same store segment, a 3.2% increase in our secondary market same store segment and a 165.4% increase in our non-same store and other segment, which was primarily a result of acquisitions. The increase in expense came from a 2.9% increase in our large market same store segment, a 1.4% increase in our secondary market same store segment and a 141.1% increase in our non-same store and other segment, which was primarily the result of acquisitions. Our same store portfolio represents those communities that have been held and have been stabilized for at least 12 months. Communities excluded from the same store portfolio would include recent acquisitions, communities being developed or in lease-up, communities undergoing extensive renovations, and communities identified as discontinued operations.

We have grown externally during the past three years by following our acquisition strategy to invest in large and mid-sized growing markets in the Sunbelt region of the United States. We acquired eight properties for our 100% owned portfolio in 2010 , eleven in 2011 and seven in 2012 . We also purchased two properties through one of our joint ventures in 2010 and one in 2011 . We did not purchase any property through our joint ventures in 2012 . Offsetting some of this increased revenue stream were two property dispositions in 2011 and nine dispositions in 2012 . We did not dispose of any properties in 2010 .

As of December 31, 2012 , the total number of apartment units that we owned or had an ownership interest in was 49,591 apartment units in 166 communities as compared to 49,133 in 167 communities at December 31, 2011 , and 46,310 apartment units in 157 communities at December 31, 2010 . In addition to the units listed above, for the year ended December 31, 2012 , we had an additional 774 units at development properties that have not yet been delivered. There were 950 such units at December 31, 2011 and 428 units at December 31, 2010 that had not yet been delivered. For communities owned 100% by us, the average effective monthly rent per apartment unit, excluding units in lease-up, increased to $ 855.71 at December 31, 2012 from $ 793.46 at December 31, 2011 and $ 736.51 at December 31, 2010 . For these same units, overall occupancy at December 31, 2012 , 2011 , and 2010 was 95.1 %, 95.1 %, 95.8 %, respectively.

Average effective monthly rent per unit is equal to the average of gross rent amounts after the effect of leasing concessions for occupied units plus prevalent market rates asked for unoccupied units, divided by the total number of units. Leasing concessions represent discounts to the current market rate. We believe average effective monthly rent is a helpful measurement in evaluating average pricing. It does not represent actual rental revenue collected per unit.

The following is a discussion of our consolidated financial condition and results of operations for the years ended December 31, 2012 , 2011 , and 2010 . This discussion should be read in conjunction with all of the consolidated financial statements included in this Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Comparison of the Year Ended December 31, 2012 , to the Year Ended December 31, 2011

Property revenues for the year ended December 31, 2012 were approximately $496.3 million , an increase of $66.5 million from the year ended December 31, 2011 due to (i) a $12.9 million increase in property revenues from our large market same store group primarily as a result of increased average rent per unit, (ii) a $5.9 million increase in property revenues from our secondary market same store group primarily as a result of increased average rent per unit, and (iii) a $47.7 million increase in property revenues from our non-same store and other group, mainly as a result of acquisitions. See further discussion on revenue growth in the Trends section below.

Property operating expenses include costs for property personnel, property personnel bonuses, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and depreciation and amortization. Property operating expenses, excluding depreciation and amortization, for the year ended December 31, 2012 were approximately $203.3 million , an increase of approximately $20.7 million from the year ended December 31, 2011 due primarily to increases in property operating expenses of (i) $2.7 million from our large market same store group, (ii) $1.1 million from our secondary market same store group, and (iii) $16.9 million from our non-same store and other group, mainly as a result of acquisitions. The increases in the large and secondary market same store groups are mainly the result of increases in employees' salaries and medical insurance. Other increases are the result of normal operating costs.

Depreciation and amortization expense for the year ended December 31, 2012 was approximately $126.1 million , an increase of approximately $15.3 million from the year ended December 31, 2011 primarily due to the increases in depreciation and amortization expense of (i) $1.0 million from our large market same store group, (ii) $1.4 million from our secondary market same store group, and (iii) $12.9 million from our non-same store and other group, mainly as a result of acquisitions. Increases in depreciation and amortization expense from our large and secondary market same store groups resulted from asset additions made during the normal course of business.

General and Administrative expense for the year ended December 31, 2012 was approximately $13.8 million , a decrease of $4.4 million from the year ended December 31, 2011 . The majority of the decrease was related to a reduction in stock incentives and employee medical insurance.

Interest expense for the year ended December 31, 2012 was approximately $58.8 million , an increase of $1.3 million from the year ended December 31, 2011 . The increase was primarily the result of an increase in our average debt outstanding from December 31, 2011 to the year ended December 31, 2012 of approximately $98.0 million .

We recorded a gain on sale of discontinued operations of $41.6 million and $12.8 million for the years ended December 31, 2011 and December 31, 2012 , respectively.

Net income attributable to noncontrolling interests for the year ended December 31, 2012 was approximately $4.6 million , an increase of $2.2 million from the year ended December 31, 2011 . The increase was primarily the result of a one-time charge of $2.1 million related to an adjustment of the historical allocation of earnings to noncontrolling interest in our operating partnership. For more discussion on the out of period adjustment, see Item 8. Financial Statements and Supplementary Data â€“ Notes to Consolidated Financial Statements Note 1.

Income from discontinued operations before gain (loss) on sale for the year ended December 31, 2012 was approximately $0.6 million , a decrease of $3.0 million from the year ended December 31, 2011 .

Primarily as a result of the foregoing and other various increases in expenses, net income attributable to Mid-America Apartment Communities, Inc. increased by approximately $56.4 million in the year ended December 31, 2012 from the year ended December 31, 2011 .

Comparison of the Year Ended December 31, 2011 , to the Year Ended December 31, 2010

Property revenues for the year ended December 31, 2011 increased by approximately $50.3 million from the year ended December 31, 2010 due to (i) a $17.2 million increase in property revenues from our large market same store group, (ii) a $8.7 million increase in property revenues from our secondary market same store group and (iii) a $24.4 million increase in property revenues from our non-same store and other group, mainly as a result of acquisitions.

Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other property related costs. Property operating expenses for the year ended December 31, 2011 increased by approximately $19.0 million from the year ended December 31, 2010 , due primarily to increases of property operating expenses of (i) $7.4 million from our large market same store group, (ii) $2.8 million from our secondary market same store group, and (iii) $8.8 million from our non-same store and other group, mainly as a result of acquisitions. The increases in the large and secondary market same store groups are primarily due to an additional $1.9 million in bulk cable expense and a $0.9 million increase in expense due to our Level One call center program. Other increases are the result of normal operating costs.

Depreciation and amortization expense increased by approximately $12.5 million primarily due to the increases of depreciation and amortization expense of (i) $2.8 million from our large market same store group, (ii) $1.0 million from our secondary market same store group, and (iii) $8.7 million from our non-same store and other group, mainly as a result of acquisitions. Increases of depreciation and amortization expense from our large and secondary market same store groups resulted from asset additions made during the normal course of business.

General and Administrative expense for the year ended December 31, 2011 was approximately $42.1 million , an increase of $9.2 million from the year ended December 31, 2010 . The majority of the increase was related to a one-time charge of $1.8 million for an out of period adjustment to our restricted stock plans, a $3.5 million increase in stock incentives, and a $1.4 million increase in employee medical insurance. The increase was also attributable to a $0.8 million increase in property acquisition expenses due to higher acquisition volume for the year ended December 31, 2011 .

Interest expense increased approximately $2.8 million in 2011 from 2010 . The increase was primarily the result of an increase in our average debt outstanding from 2010 to 2011 of approximately $127.6 million .

During the year ended December 31, 2010 , we recorded an asset impairment charge of approximately $1.9 million related to one of our original initial public offering communities. This community was part of our secondary market same store segment. Fair value of the community was determined by an offer. No asset impairment charges were recorded during the year ended December 31, 2011 .

For the year ended December 31, 2011 , we recorded total gain on sale of discontinued operations of approximately $12.8 million . There was no material gain (loss) on sale of discontinued operations during the year ended December 31, 2010 .

Primarily as a result of the foregoing, net income attributable to Mid-America Apartment Communities, Inc. increased by approximately $19.1 million in 2011 from 2010 .

Funds from Operations

Funds from operations, or FFO, represents net income (computed in accordance with GAAP) excluding extraordinary items, net income attributable to noncontrolling interest, asset impairment, gains or losses on disposition of real estate assets, plus depreciation and amortization of real estate, and adjustments for joint ventures to reflect FFO on the same basis. Disposition of real estate assets includes sales of discontinued operations as well as proceeds received from insurance and other settlements from property damage.

In response to the Securities and Exchange Commissionâ€™s Staff Policy Statement relating to EITF Topic D-42 concerning the calculation of earnings per share for the redemption of preferred stock, we have included the amount charged to retire preferred stock in excess of carrying values in our FFO calculation.

Our policy is to expense the cost of interior painting, vinyl flooring, and blinds as incurred for stabilized properties. During the stabilization period for acquisition properties, these items are capitalized as part of the total repositioning program of newly acquired properties, and, thus are not deducted in calculating FFO.

FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of liquidity. We believe that FFO is helpful to investors in understanding our operating performance in that such calculation excludes depreciation and amortization expense on real estate assets. We believe that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. Our calculation of FFO may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs.

FFO for the year ended December 31, 2012 increased approximately $40.8 million from the year ended December 31, 2011 primarily as a result of the increase in property revenues of approximately $66.5 million discussed above that was only partially offset by the $20.7 million increase in property operating expenses.

FFO for the year ended December 31, 2011 increased approximately $31.6 million from the year ended December 31, 2010 primarily as a result of the increase in property revenues of approximately $50.3 million discussed above that was only partially offset by the $19.0 million increase in property operating expenses.

Trends

During 2012 , rental demand for apartments continued to be strong, as it was in 2011 . This was evident through same store physical occupancy that was consistent with 2011 , at nearly 96% on average for both years, combined with steady price increases on both new leases and renewals signed throughout the year. We have maintained this momentum with job formation, one of the primary drivers of apartment demand, continuing to increase at a below average pace.

An important part of our portfolio strategy is to maintain a broad diversity of markets across the Sunbelt region of the United States. The diversity of markets tends to mitigate exposure to economic issues in any one geographic market or area. We believe that a well diversified portfolio, including both large and select secondary markets, will perform well in â€śupâ€ť cycles as well as weather â€śdownâ€ť cycles better. During 2012 , we added an asset in the Kansas City, Missouri market to our portfolio and exited the Cincinnati, Ohio market. As of December 31, 2012 , we were invested in approximately 50 markets, with 59% of our gross assets in large markets and 41% of our gross assets in select secondary markets.

We also continued to benefit in 2012 on the supply side. New supply of rental units entering the market was low, running below historical new supply delivery averages. Multifamily permitting did pick up in 2012 but remained below peak levels. We believe that this permitting will ultimately lead to an increase in supply. Competition from condominiums reverting back to rental units, or new condominiums being converted to rental, was not a major factor in our portfolio because most of our submarkets have not been primary areas for condominium development. We have found the same to be true for rental competition from single family homes. We have avoided committing a significant amount of capital to markets where most of the excessive inflation in house prices has occurred. We saw significant rental competition from condominiums or single family houses in only a few of our submarkets.

Our focus throughout 2012 was increasing pricing where possible through our revenue management system, while maintaining strong physical occupancy. Through these efforts, same store effective monthly rent per unit for the year was higher than 2011 by 5%. With strong occupancy in place heading into the typically slower winter leasing season, we were able to maintain pricing momentum in the fourth quarter of 2012 and expect seasonality to have less of an impact on pricing in the first quarter of 2013.

Overall same store revenues increased 4.7% for the year ended December 31, 2012 as compared to the year ended December 31, 2011 . As expected, more robust revenue growth occurred in 2012 as rents continued the upward trend that began in the latter part of 2010 . Although new multifamily development is occurring, the permitting data so far suggests that levels will remain below pre-recession deliveries, although there can be no assurance in this regard. Also, we believe that more sustainable credit terms for residential mortgages, as evidenced by the recently announced â€śQualified Mortgage Ruleâ€ť, should work to favor rental demand at existing multi-family properties. Long term, we expect demographic trends (including the growth of prime age groups for rentals and immigration and population movement to the southeast and southwest) will continue to build apartment rental demand for our markets.

Should the economy fall back into a recession, more disciplined mortgage financing for single family home buying should lessen the impact to the multifamily sector to some degree, but a weak economy and employment market would nevertheless limit rent growth prospects.

We continue to develop improved products, operating systems and procedures that enable us to capture more revenues. The continued benefit of ancillary services (such as our cable saver and deposit saver programs), improved collections and utility reimbursements enable us to capture increased revenue dollars. We also actively work on improving processes and products to reduce expenses, such as new web-sites and internet access for our residents that enable them to transact their business with us more simply and effectively.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview of the Three Months Ended September 30, 2013

We experienced an increase in income from continuing operations for the three months ended September 30, 2013 over the three months ended September 30, 2012 as increases in revenues outpaced increases in property operating expenses. The increases in revenues came from a 5.0% increase in our large market same store segment, a 2.8% increase in our secondary market same store segment, both of which are driven by increased average rent per unit, and a 84.4% increase in our non-same store and other segment, which was primarily a result of acquisitions. Our same store portfolio represents those communities that have been held and have been stabilized for at least 12 months. Communities excluded from the same store portfolio would include recent acquisitions, communities being developed or in lease-up, communities undergoing extensive renovations, and communities identified as discontinued operations or classified as held for sale.

As of September 30, 2013 , our wholly-owned portfolio consisted of 47,187 apartment units in 156 communities, compared to 47,941 apartment units in 161 communities at September 30, 2012 . For these communities, the average effective rent per apartment unit, excluding units in lease-up, increased to $ 891 per unit at September 30, 2013 from $ 854 per unit at September 30, 2012 . For these same communities, overall occupancy increased to 96.3 % at September 30, 2013 from 96.0 % at September 30, 2012 . Average effective rent per unit is equal to the average of gross rent amounts after the effect of leasing concessions for occupied units plus prevalent market rates asked for unoccupied units, divided by the total number of units. Leasing concessions represent discounts to the current market rate. We believe average effective rent is a helpful measurement in evaluating average pricing. It does not represent actual rental revenue collected per unit.

Effective October 1, 2013, pursuant to the Agreement and Plan of Merger, dated as of June 3, 2013, an indirect, wholly-owned subsidiary of our Operating Partnership merged with and into Colonial LP, with Colonial LP surviving the merger, and, immediately following the partnership merger, Colonial merged with and into MAA, with MAA surviving the merger. The combined company will operate under the name "MAA" and will be run by our existing management team. For additional details, see Item 1. Financial Statements â€“ Notes to Consolidated Financial Statements, Note 11. All other footnotes contained in this Form 10-Q have been prepared as of September 30, 2013.
The following is a discussion of our consolidated financial condition and results of operations for the three- and nine- month periods ended September 30, 2013 and 2012 . This discussion should be read in conjunction with all of the consolidated financial statements included in this Quarterly Report on Form 10-Q.

Results of Operations

Comparison of the Three -Month Period Ended September 30, 2013 to the Three -Month Period Ended September 30, 2012

Property revenues for the three months ended September 30, 2013 were approximately $136.3 million , an increase of approximately $13.3 million from the three months ended September 30, 2012 due to (i) a $3.1 million increase in property revenues from our large market same store group primarily as a result of an increase in average rent per unit, (ii) a $1.4 million increase in property revenues from our secondary market same store group primarily as a result of an increase in average rent per unit, and (iii) a $8.8 million increase in property revenues from our non-same store and other group, primarily as a result of acquisitions. See further discussion on revenue growth in the Trends section below.

Property operating expenses include costs for property personnel, property personnel bonuses, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and depreciation and amortization. Property operating expenses, excluding depreciation and amortization, for the three months ended September 30, 2013 were approximately $56.2 million , an increase of approximately $4.9 million from the three months ended September 30, 2012 due primarily to (i) an increase in property operating expenses of $0.7 million from our large market same store group, (ii) an increase of $0.9 million from our secondary market same store group, and (iii) an increase of $3.3 million from our non-same store and other group, primarily as a result of acquisitions. The increases in the large market same store and secondary market same store groups are mainly the result of increases in real estate taxes. Other increases are the result of normal operating costs.

Depreciation and amortization expense for the three months ended September 30, 2013 was approximately $33.0 million , an increase of approximately $2.0 million from the three months ended September 30, 2012 primarily due to (i) an increase in depreciation and amortization expense of $0.2 million from our large market same store group, (ii) an increase of $0.3 million from our secondary market same store group, and (iii) an increase of $1.5 million from our non-same store and other group, mainly as a result of acquisitions.

Interest expense increased by approximately $0.4 million during the three months ended September 30, 2013 compared to the three months ended September 30, 2012 primarily as a result of an increase in our average debt outstanding of approximately $71.8 million . This increase was partially offset by a decrease in the average interest rate from 3.7% to 3.2% .

For the three months ended September 30, 2013 , we recorded total gain on sale of four properties presented in discontinued operations of approximately $28.8 million compared to $16.1 million for the sale of five properties during the three months ended September 30, 2012 .

We also incurred merger related expenses for the acquisition of Colonial of $5.6 million for the three months ended September 30, 2013 . There were no merger related expenses for the three months ended September 30, 2012 .

Primarily as a result of the foregoing, net income attributable to MAA increased by approximately $13.4 million in the three months ended September 30, 2013 from the three months ended September 30, 2012 .

Comparison of the Nine -Month Period Ended September 30, 2013 to the Nine -Month Period Ended September 30, 2012

Property revenues for the nine months ended September 30, 2013 were approximately $397.8 million , an increase of approximately $45.5 million from the nine months ended September 30, 2012 due to (i) a $9.8 million increase in property revenues from our large market same store group primarily as a result of an increase in average rent per unit, (ii) a $4.8 million increase in property revenues from our secondary market same store group primarily as a result of an increase in average rent per unit, and (iii) a $30.9 million increase in property revenues from our non-same store and other group, primarily as a result of acquisitions. See further discussion on revenue growth in the Trends section below.

Property operating expenses include costs for property personnel, property personnel bonuses, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and depreciation and amortization. Property operating expenses, excluding depreciation and amortization, for the nine months ended September 30, 2013 were approximately $160.4 million , an increase of approximately $14.3 million from the nine months ended September 30, 2012 due primarily to (i) an increase in property operating expenses of $1.8 million from our large market same store group, (ii) an increase of $1.3 million from our secondary market same store group, and (iii) an increase of $11.2 million from our non-same store and other group, primarily as a result of acquisitions. The increases in the large market same store and secondary market same store groups are mainly the result of increases in real estate taxes. Other increases are the result of normal operating costs.

Depreciation and amortization expense for the nine months ended September 30, 2013 was approximately $97.9 million , an increase of approximately $8.2 million from the nine months ended September 30, 2012 primarily due to (i) an increase in depreciation and amortization expense of $0.4 million from our large market same store group, (ii) an increase of $0.3 million from our secondary market same store group, and (iii) an increase of $7.5 million from our non-same store and other group, mainly as a result of acquisitions.

Interest expense increased by approximately $3.3 million during the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 primarily as a result of an increase in our average debt outstanding of approximately $94.3 million. This increase was partially offset by a decrease in the average interest rate from 3.7% to 3.2% .

For the nine months ended September 30, 2013 , we recorded total gain on sale of eight properties presented in discontinued operations of approximately $71.9 million compared to $38.5 million for the sale of eight properties during the nine months ended September 30, 2012 .

We also incurred merger related expenses for the acquisition of Colonial of $11.3 million for the nine months ended September 30, 2013 . There were no merger related expenses for the nine months ended September 30, 2012 .

Primarily as a result of the foregoing, net income attributable to MAA increased by approximately $41.6 million in the nine months ended September 30, 2013 from the nine months ended September 30, 2012 .

Funds From Operations and Net Income

Funds from operations, or FFO, represents net income (computed in accordance with GAAP) excluding extraordinary items, net income attributable to noncontrolling interest, asset impairment, gains or losses on disposition of real estate assets, plus depreciation and amortization of real estate, and adjustments for joint ventures to reflect FFO on the same basis. This definition of FFO is in accordance with the National Association of Real Estate Investment Trusts, or NAREIT, definition. Disposition of real estate assets includes sales of discontinued operations.

FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of liquidity. We believe that FFO is helpful to investors in understanding our operating performance in that such calculation excludes depreciation and amortization expense on real estate assets. We believe that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. Our calculation of FFO may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs.

FFO for the three- and nine- month periods ended September 30, 2013 increased by approximately $1.9 million and $13.2 million , respectively, from the three- and nine- month periods ended September 30, 2012 . The increases in FFO are primarily a result of the increases in property revenues of approximately $13.3 million and $45.5 million for the three- and nine- month periods ending September 30, 2013 , respectively, compared to the three- and nine- month periods ending September 30, 2012 . These revenue increases were only partially offset by the $4.9 million and $14.3 million increases in property operating expenses, excluding depreciation and amortization for the same periods. FFO is also reduced by the $5.6 million and $11.3 million in merger related expenses for the three and nine months ended September 30, 2013 .

Trends

During the three-month period ended September 30, 2013, rental demand for apartments was strong, as it was throughout 2012 and the first two quarters of 2013. This strength was evident on two fronts: same store physical occupancy during the quarter ended September 30, 2013 increased as compared to the quarter ended September 30, 2012, averaging 96.3% for the current quarter and 96.0% for the same quarter last year; and average pricing on both new leases and renewals signed during the three-month period ended September 30, 2013 was higher as compared to the three-month period ended June 30, 2013 and the three month period ended September 30, 2012. We have maintained this momentum despite job formation, one of the primary drivers of apartment demand, continuing to increase at a below average pace.

An important part of our portfolio strategy is to maintain a broad diversity of markets across the Sunbelt region of the United States. The diversity of markets tends to mitigate exposure to economic issues in any one geographic market or area. We believe that a well-diversified portfolio, including both large and select secondary markets, will perform well in â€śupâ€ť cycles as well as weather â€śdownâ€ť cycles better. As of September 30, 2013, we were invested in approximately 45 defined Metropolitan Statistical Areas, with 54% of our gross assets in large markets and 46% of our gross assets in select secondary markets.

New supply of rental units entering the market remained below historical new supply delivery averages, but multifamily permitting did pick up in 2012 and has continued into 2013. We believe this permitting will ultimately lead to an increase in supply, but also believe the lack of new apartments in recent years combined with demand from new households will help keep supply and demand in balance. Competition from condominiums reverting back to rental units, or new condominiums being converted to rental, was not a major factor in our portfolio because most of our submarkets have not been primary areas for condominium development. We have found the same to be true for rental competition from single family homes. We have avoided committing a significant amount of capital to markets or submarkets where most of the excessive inflation in house prices has occurred. We saw significant rental competition from condominiums or single family houses in only a few of our submarkets.

Our focus continues to be on increasing pricing where possible through our revenue management system, while maintaining strong physical occupancy. Through these efforts, same store effective monthly rent per unit for the three-month period ended September 30, 2013 increased by 3.4% from the three-month period ended September 30, 2012. With strong occupancy in place as we enter the winter leasing season, the Company will be able to maximize the marketâ€™s pricing potential in the fourth quarter.

Overall same store revenues increased 4.0% for the three-month period ended September 30, 2013 as compared to the three-month period ended September 30, 2012. This increase was primarily due to rising rents, and helped by increases in ancillary income. Although new multifamily development is occurring, we believe the permitting data so far suggests that levels will remain below pre-recession deliveries, although there can be no assurance in this regard. Also, we believe that more sustainable credit terms for residential mortgages should work to favor rental demand at existing multi-family properties. Long term, we expect demographic trends (including the growth of prime age groups for rentals and immigration and population movement to the southeast and southwest) will continue to build apartment rental demand for our markets.

We continue to develop improved products, operating systems and procedures that we believe enable us to capture more revenues. The continued benefit of ancillary services (such as our cable saver and deposit saver programs), improved collections and utility reimbursements enable us to capture increased revenue dollars. We also actively work on improving processes and products to reduce expenses, such as new web-sites and internet access for our residents that enable them to transact their business with us more simply and effectively.

Liquidity and Capital Resources

Net cash flow provided by operating activities increased to $168.8 million for the nine months ended September 30, 2013 , compared to $158.0 million for the nine months ended September 30, 2012 . This increase is mainly a result of cash inflows from property operations resulting from a $45.5 million increase in property revenues for the nine months ended September 30, 2013 from the nine months ended September 30, 2012 , which was partially offset by a $14.3 million increase in property operating expenses, excluding depreciation and amortization and other incremental operating expenses in total over the same period. The change is also due to the timing of payments of operating liabilities.

Net cash used in investing activities was approximately $94.4 million during the nine months ended September 30, 2013 compared to $311.0 million during the nine months ended September 30, 2012 . During the nine months ended September 30, 2013 , we had $89.9 million in cash outflows for property acquisitions. We had $314.9 million cash outflows for property acquisitions for the nine months ended September 30, 2012 . We also had cash outflows of $35.4 million related to normal capital expenditures for the nine months ended September 30, 2013 compared to $37.0 million for the nine months ended September 30, 2012 . We also had cash outflows of $26.1 million related to development activities during the nine months ended September 30, 2013 compared to approximately $54.2 million for the nine months ended September 30, 2012 . In addition to acquisition costs and development costs, we had outflows of $8.6 million for renovations to existing real estate assets during the nine months ended September 30, 2013 , compared to $11.1 million for the nine months ended September 30, 2012 . We had cash inflows related to property dispositions of $118.8 million during the nine months ended September 30, 2013 , compared to $97.1 million related to the disposition of eight properties during the nine months ended September 30, 2012 . We received approximately $8.3 million during the nine months ended September 30, 2013 as distributions from our joint ventures compared to $11.9 million for the nine months ended September 30, 2012 . During the nine months ended September 30, 2013 , we had a cash outflow of $57.4 million related to the funding of escrow for exchange acquisitions. We had no such outflows during the nine months ended September 30, 2012 .

Net cash provided by financing activities was approximately $97.6 million for the nine months ended September 30, 2013 , compared to $109.1 million during the nine months ended September 30, 2012 . During the nine months ended September 30, 2013 , we received net proceeds of approximately $25.0 million primarily from the issuance of shares of common stock through our ATM program and the optional cash purchase feature of our DRSPP. Comparatively, during the nine months ended September 30, 2012 , we received proceeds of approximately $174.0 million from the issuance of shares of common stock through our March 2, 2012 public offering and the optional cash purchase feature of our DRSPP. We used a portion of the proceeds to partially fund the pay down of our credit lines during the nine months ended September 30, 2012 . We currently have 4,134,989 shares remaining under our ATM program. We incurred approximately $168.3 million of debt in the nine months ended September 30, 2013 compared to incurring $24.2 million of debt in the nine months ended September 30, 2012 .

The weighted average interest rate at September 30, 2013 for the $1.1 billion of secured debt outstanding was 3.5% , compared to the weighted average interest rate of 3.9% on $1.2 billion of secured debt outstanding at September 30, 2012 . The weighted average interest rate at September 30, 2013 for the $810.0 million of unsecured debt was 2.7% compared to the weighted average interest rate of 3.4% on $514 million of unsecured debt outstanding at September 30, 2012 . We utilize both conventional and tax exempt debt to help finance our activities. Borrowings are made through individual property mortgages as well as company-wide credit facilities and bond placements. We utilize fixed rate borrowings, interest rate swaps and interest rate caps to manage our current and future interest rate risk. More details on our borrowings can be found in the schedules presented later in this section.

On March 1, 2012 , our Operating Partnership entered into a $150 million unsecured term loan agreement with a syndicate of banks led by KeyBank and J.P. Morgan at a rate of LIBOR plus a spread of 1.40% to 2.15% based on a leveraged based pricing grid and a maturity date of March 1, 2017 . In July 2012, we received an investment grade rating (Baa2) from Moody's pricing service, which reduced the variable rate to LIBOR plus a spread of 1.10 % to 2.05 % based on an investment grade ratings grid. We had borrowings of $150 million outstanding under this agreement at September 30, 2013 .

On August 31, 2012 , our Operating Partnership issued $175 million of Senior Unsecured Notes to be funded at three separate times. The notes were offered in a private placement with four tranches: $18 million at 3.15% maturing on November 30, 2017 ; $20 million at 3.61% maturing on November 30, 2019 ; $117 million at 4.17% maturing on November 30, 2022 ; and $20 million at 4.33% maturing on November 30, 2024 . All of the notes are guaranteed by MAA. As of September 30, 2013 , the full amount of the notes has been funded and is included in our Consolidated Balance Sheet.

On June 14, 2013, our Operating Partnership entered into a $250 million term loan agreement with JPMorgan at a rate of LIBOR plus a spread of 1.30% on any outstanding borrowings. This agreement matures on June 14, 2014, although borrowings are only allowed to be drawn upon up until 60 days subsequent to the closing of the Merger. We had no borrowings under this agreement at September 30, 2013 .

On August 7, 2013, our Operating Partnership entered into a $500 million unsecured revolving credit facility agreement with KeyBank National Association and thirteen other banks. This agreement amends our Operating Partnership's previous unsecured credit facility with KeyBank. Interest is paid using an investment grade pricing grid using LIBOR plus a spread of 0.90% to 1.70%. As of September 30, 2013 , we had $350 million borrowed under this facility.

Approximately 24% of our outstanding obligations at September 30, 2013 were borrowed through credit facilities with/or credit enhanced by FNMA, also referred to as the FNMA Facilities. The FNMA Facilities have a combined line limit of approximately $799.9 million , of which $453.9 million was collateralized and available to borrow at September 30, 2013 . We had total borrowings outstanding under the FNMA Facilities of $453.9 million at September 30, 2013 . Various tranches of the FNMA Facilities mature from 2013 through 2033 . The FNMA Facilities provide for both fixed and variable rate borrowings. The interest rate on the majority of the variable portion is based on the FNMA Discount Mortgage Backed Security, or DMBS, rate, which are credit-enhanced by FNMA and are typically sold every 90 days by Prudential Mortgage Capital at interest rates approximating three-month London Interbank Offered Rate, or LIBOR, less a spread that has averaged 0.17% over the life of the FNMA Facilities, plus a credit enhancement fee of 0.49% to 0.67% .

Approximately 11% of our outstanding obligations at September 30, 2013 were borrowed through a facility with/or credit enhanced by Freddie Mac, also referred to as the Freddie Mac Facility. The Freddie Mac Facility has a total line limit of $200.0 million , of which $198.2 million was collateralized and available to borrow at September 30, 2013 . We had total borrowings outstanding under the Freddie Mac Facility of approximately $198.2 million at September 30, 2013 . The Freddie Mac facility matures in 2014 . The interest rate on the Freddie Mac Facility renews every 30 or 90 days and is based on the Freddie Mac Reference Bill Rate on the date of renewal, which has historically approximated the equivalent one month or three month LIBOR, plus a credit enhancement fee of 0.65% . The Freddie Mac Reference Bill rate has traded consistently below LIBOR, and the historical average spread is 0.30% below LIBOR.

We also maintain a $500 million unsecured credit facility with nine banks led by KeyBank, which bears interest at one-month LIBOR plus a spread of 0.9% to 1.70% based on an investment pricing grid. This credit facility expires in November 2017 with a one year extension option. At September 30, 2013 , we had $498.6 million available to be borrowed under this credit facility with $350 million borrowed. Approximately $1.4 million of this credit facility is used to support letters of credit.

Each of our credit facilities is subject to various covenants and conditions on usage, and the secured facilities are subject to periodic re-evaluation of collateral. If we were to fail to satisfy a condition to borrowing, the available credit under one or more of the facilities could not be drawn, which could adversely affect our liquidity. In the event of a reduction in real estate values, the amount of available credit could be reduced. Moreover, if we were to fail to make a payment or violate a covenant under a credit facility, one or more of our lenders could declare a default after applicable cure periods, accelerate the due date for repayment of all amounts outstanding and/or foreclose on properties securing such facilities. A default on an obligation to repay outstanding debt could also create a cross default on a separate piece of debt, whereby one or more of our lenders could accelerate the due date for repayment of all amounts outstanding and/or foreclose on properties securing the related facilities. Any such event could have a material adverse effect. We believe we were in compliance with these covenants and conditions on usage at September 30, 2013 .

Before we begin with our prepared comments this morning, I want to point out that as part of the discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the Safe Harbor language included in yesterdayâ€™s press release and our 34-Act filings with the SEC, which describe risk factors that may impact future results. These reports, along with a copy of todayâ€™s prepared comments and an audio copy of this morningâ€™s call, will be available on our website.

I'll now turn the call over to Eric.

H. Eric Bolton - Chairman, Chief Executive Officer and President
Thanks, Leslie, and good morning, everyone. I'd like to start my comments this morning by expressing my appreciation for all the hard work over the summer months by our folks at MAA and Colonial. We obviously had a busy summer, as our most active leasing season was also highlighted by quite a bit of work surrounding the integration of our company's operating and reporting systems, ensuring we were ready to execute as the combined company upon closing our merger. Advisers for both companies did a terrific job, and the merger transaction was successfully closed on October 1. Our property associates and the entire management team from both companies really pulled together, and we are now successfully up and running as a combined operation.

As noted in our earnings release, both MAA and Colonial portfolios ended the quarter with strong occupancy, and as a result, we are well positioned for the fall and winter leasing season. I'd also like to thank Tom Lowder and the entire Colonial management team for their hard work and enthusiastic support in positioning our now combined company for a strong start.

As reported in yesterday's earnings release, MAA's core FFO per share for the third quarter was $1.25 and at the top end of our guidance range. MAA's same-store NOI performance of 4.6% was in line with our expectation, and the outperformance in FFO was due to a combination of better-than-expected lease-up in our development pipeline and lower-than-expected interest cost. The midpoint of our forecast range for 2013 growth in same-store NOI of 5% has remained consistent all year.

As expected, during the quarter, leasing conditions continued to support more robust performance from our large market segment of the portfolio. Houston, Dallas, Austin, Atlanta and Nashville all delivered solid revenue results. Sluggish employment conditions in Memphis and Little Rock held back rent growth and impacted our Secondary Markets segment of the portfolio in the third quarter. We continue to believe that as we head into next year, as new supply deliveries are likely to generate some moderation in pricing power, our Secondary Markets segment of the portfolio will provide a stabilizing influence on the overall portfolio performance.

Next year's outlook for the ratio of new jobs to new unit deliveries is in the 8:1 range for our large market segment of the portfolio, which is consistent with this year. While the secondary market segment is forecasted to move from jobs to new units, ratio of 6:1 this year to well over 10:1 in 2014.